David Grayson, Emeritus Professor of Corporate Responsibility at Cranfield School of Management, is celebrating forty years working on a collaboration between business and society. He is currently chair of the Institute of Business Ethics and part of the Circle of Advisers for Business Fights Poverty. The co-author of the book “All In – The Future of Business Leadership” shares insights on how companies can adapt to the era of radical transparency.
1. In such unprecedented circumstances, what should responsible businesses concentrate on?
As economies across the world emerge at different speeds from the lockdown, the mantra has to be “Adapt, Survive, Thrive”.
Businesses will need to adapt to new ways of working and operating, in order to survive. The immediate responsibility is for the health and welfare of employees, customers and suppliers. Redundancies should be a last resort, rather than the first choice. This requires exploring alternative options with employees, such as temporarily reducing hours and pay. If lay-offs are unavoidable, how can these be managed as humanely and generously as possible?
2. You wrote in an article recently that the long-term health of free enterprise capitalism will depend on delivering profit with purpose. What are the right steps a company should take in order to define its purpose and deliver on it?
The “Purpose of the Corporation” project under the auspices of the British Academy has proposed that the generic purpose of business be defined as: “to profitably solve problems of people and planet, and not profit from causing problems.”. I agree. Encouragingly, there is growing support for the idea that, in order to survive and thrive in the indefinite future, businesses need to be managed in the long-term interests of all stakeholders rather than just in the short-term interests of shareholders only. It is all about time-horizons.
Over the medium to longer-term, I see no difference between how to optimise shareholder-value and stakeholder-value. Other than possibly a very short-term scenario, you can only deliver for shareholders, if you are also delivering for other stakeholders too.
An individual business’s purpose has to be inspiring, authentic, and practical: in other words, the purpose must help organisations to take the tough decisions.
Ultimately, boards and senior management have to be held accountable for how they define their organisational purpose, but they can involve different parts of the business in helping to define. It helps if the business has a long heritage / history that it can draw on. Unilever, for example, was founded in the late 19th Century, with the purpose to “make cleanliness commonplace.” Today, that has been updated for the 21st Century as being “to make sustainable living commonplace.”
3. There is more pressure than ever for banks to stop the provision of financial services to companies in the energy sector, and to gas and electric utilities that are not aligned with the goals of the Paris Climate Agreement. To what extent do you agree?
I expect the debate around “Stranded Assets” to grow rapidly. I think it makes financial commonsense for all financial institutions to be reviewing their portfolios and developing transition plans to move out of unsustainable sectors.
4. You stated that looking at businesses through an ethical lens has never been more crucial. Why is now the time to act that way?
We are now in an era of radical transparency: what the Canadian writer Don Tapscott has vividly called “The Naked Corporation.” And as Tapscott says: “if you are going to be naked, you had better be ‘buff!’”
Buff, in this context, meaning that you take responsibility for your impacts. Employees and other stakeholders: customers, partners, active citizens are becoming increasingly vocal in calling out what they consider to be irresponsible behavior. And, on the positive side, there is growing evidence that businesses that are responsible, ethical, sustainable, inclusive and purpose-led and are “great places to work” out-perform the market over the medium to long-term. There can be a cost to getting it wrong – and rewards for using that ethical lens!
5. Much of the market capitalization of businesses is made up of reputation and brand. Do you think companies will make changes rapidly in the direction of purpose branding or we will only see gradual improvement in the next years?
I pause on “purpose branding!” This might imply that Purpose should be marketing-led – and I disagree! It is all too easy for that to become Purpose-wash – like “greenwashing” – where the claims are not substantiated by the action! I prefer the old dictum: “by their deeds (actions), should you know them.”
Reputation and trust come as a result of behavior and action.
If though, the underlying question is about progress towards more responsible and ethical business, then I am an optimist – without illusions. Don’t expect the pace to be uniform or all in the same, positive direction – but overall, I think the bottom-line business case will shine through!
6. When businesses are looking at sustainability only to reduce risks by minimizing negative impacts, what potential are they missing out?
The larger part! I think public expectations in many parts of the world are outgrowing the idea that “do less harm” is enough. More and more citizens, customers, employees expect businesses to be Net Positive.
Personally, I am not sure that just reducing risks by minimizing negative Social, Environmental and Economic impacts is sustainable anyway – you have to find the opportunities.
7. Which are the top 3 lessons the pandemic taught you?
I go back to my opening message: Adapt, Survive, Thrive.
Beyond that, I think the pandemic has reminded us of the need for solidarity and the need to work together to find common solutions for global problems that are beyond the capacity of one country or region alone, to solve. Think of the big issues like Climate Change and loss of biodiversity or hyper global inequalities – as well as how pandemics can be controlled in a globalised society.
Longer-term, we have to become more resilient. In the business context, that means going All In for sustainability. You cannot any longer be hesitant or half-hearted about it.